Incumbency and Entry in Licence Auctions: The Anglo-Dutch Auctions Meets other Simple Alternatives
AbstractThe existence of ex-ante strong incumbents is a barrier to entry in auctions for goods such as licenses. Introducing inefficiencies that favor entrants is a way to induce entry and thus create competition. Designs such as the Anglo-Dutch auction have been proposed with this goal in mind. We first show that indeed the Anglo-Dutch auction fosters entry and increases the revenues of the seller. However, we argue that a more effective way could be to stage the allocation of the good so that each stage reveals information about the participants. We show that a sequence of English auctions, with high reserve prices in early rounds, is a procedure with this property that is more efficient than any one-stage entry auction. Moreover, it also dominates the Anglo-Dutch auction in terms of seller's revenues.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 223.
Date of creation: Jul 2005
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Other versions of this item:
- Azacis, Helmuts & Burguet, Roberto, 2008. "Incumbency and entry in license auctions: The Anglo-Dutch auction meets another simple alternative," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 730-745, May.
- Azacis, Helmuts & Burguet, Roberto, 2005. "Incumbency and Entry in License Auctions: The Anglo-Dutch Auction Meets Other Simple Alternatives," Cardiff Economics Working Papers E2005/11, Cardiff University, Cardiff Business School, Economics Section.
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